Swaps clearing is driving firms to bilateral market

A paper from US Office of Financial
Research confirmed what many will certainly have feared and
some have probably known for a while – mandatory
clearing has made the over-the-counter market expensive and
firms are consequently moving to the bilateral space.

The report itself pulls no punches.

Samim Ghamami and Paul Glasserman, the
authors, wrote: "In the absence of a cost advantage for central
clearing, market participants may be motivated to customise
contracts in order to trade them bilaterally."

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